UPDATE: Vivendi Wins Victory In Reducing US Class Action Size
February 23 2011 - 8:39AM
Dow Jones News
Vivendi SA (VIV.FR) Wednesday won a major court battle as a U.S.
judge's decision to narrow the size of a class action against the
company slashed its potential liabilities by 80%.
The Paris-based company said it will "significantly" reduce the
EUR550 million provision it made in its 2009 accounts to cover any
eventual payout after a jury in January last year found Vivendi
liable for 57 misstatements about its financial condition in 2001
and 2002 and said it acted recklessly in connection with those
statements.
The damages arising from the ruling in January 2010, which was
based on a class involving shareholders outside the U.S., could
have totaled more than $9 billion, according to lawyers for the
shareholders, although Vivendi's lawyer Herve Pisani rejected the
sum as "unfounded."
The ruling Tuesday by U.S. District Judge Richard Holwell that
shareholders who bought Vivendi shares outside the U.S. are barred
from bringing fraud claims against the company in the U.S.,
considerably narrowed the overall size of the potential class and
therefore dramatically cut Vivendi's potential liabilities. The
move, which will free up cash, comes as the group prepares to buy
out Vodafone PLC's (VOD) minority stake in telecom operator
SFR.
"We are very satisfied with today's decision", Vivendi's Chief
Executive Jean-Bernard Levy said in a statement. "It is a
substantial victory for Vivendi."
At 1302 GMT, shares in Vivendi rose 1.7% to EUR20.59 on the
news, which is the latest in a string of positive developments for
the company, which also recently settled a protracted legal battle
in Poland.
"After recent case law in the U.S. pointed the way, the decision
is not unexpected, but it's still reassuring, as it lowers
massively the chances of an eventual settlement far above that
already provided," said Kepler Capital Markets analyst Conor O'
Shea.
Vivendi had long been trying to achieve the narrowing of the
class, arguing in particular that the opt-out nature of U.S. class
action suits, which automatically include plaintiffs in a class
unless they choose otherwise, is incompatible with French laws,
where plaintiffs must actively decide to join a lawsuit.
In France, where class actions are not recognized, shareholders
have to file individual complaints or join an association which
files on their behalf, experts say.
It isn't clear from Judge Holwell's decision what the next step
in the litigation process will be.
He declined to enter a final judgment against Vivendi, saying
the company is entitled to challenge on an individual basis the
extent to which shareholders relied on the alleged misstatements.
The judge said the individual reliance issues may require separate
proceedings.
"In addition, it may be that the methods for calculating an
individual claimant's damages will be hotly contested and may
trigger additional appeals," the judge said.
Vivendi remains committed to appealing any eventual decision by
the court, Pisani said. According to the lawyer, it could still
take a year or two before the size of any indemnification will be
known as the percentage of shareholders making a claim has to be
established before the size of an indemnification can be set.
Vivendi said it will analyze the judge's decision in detail to
determine its next steps, but declined to comment further.
-By Ruth Bender of Dow Jones Newswires and Max Colchester of
Wall Street Journal; ruth.bender@dowjones.com,
max.colchester@wsj.com
(Chad Bray and Inti Landauro contributed to this report.)